TMA wants lenders to highlight the number of customers opting for the execution-only process, as result of such sales tactics, and the protections consumers risk losing from the Financial Ombudsman Service by not taking out advice.
The club said that for each unadvised product transfer lenders are increasing the underlying risk in the mortgage market as they are providing potentially unsuitable products to mortgage holders.
Disclosure of the number of borrowers who are snapping up lender offers to waive early repayment charges, forgoing potential advice for the promise of a lower payment, would galvanise the mortgage broker community to build their own retention teams, said Copland.
Copland, director of TMA, said: “By understanding when the lender is contacting the client helps the broker work with the lender and the client to get the best consumer outcome. This should all be about partnership rather than a race to see who contacts the client first.”
Product transfers are not recorded separately to remortgaging transactions, making it difficult to assess how often they take place.
Remortgaging statistics are recorded in industry gross lending figures whilst product transfers are not. Recent estimates suggest the product transfer market is worth over a £80bn a year. According to the latest Association for Mortgage Intermediaries economic bulletin, product transfer gross lending has now reached between £80bn and £100bn.
TMA wants to see reporting rules changed so that product transfers are reported to regulatory bodies such as the Prudential Regulation Authority and the Financial Conduct Authority made public through the Council of Mortgage Lenders.
Copland added: “The risks of this continuing unreported are extremely concerning. Although we know that this market is increasing, we don’t know by how much and how fast it is growing. However, it is clear millions of people are at real risk of switching to a mortgage which isn’t right for them and the financial implications of this could be irreversible for the individual and their family. If this market is not made more transparent, the underlying strength of the UK mortgage market could be in for a major shock.”
It is certain that the product transfer market has grown since the credit crunch and has skyrocketed since the implementation of the Mortgage Market Review. This is because lenders have concentrated efforts on their existing mortgage books without necessarily giving advice. In the first nine months of 2016, remortgaging approvals were 15% higher than in the equivalent period of 2015.
TMA believes lenders should offer both new and existing clients the same commercial rates to improve customer outcomes and increase transparency in the product transfer market. TMA is calling for lenders to report when they are approaching customers to reduce the risk of borrowers transferring to an unsuitable product.